NEA News 2004 Volume 22, Number 1

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Nuclear energy: the role of government

The NEA Nuclear Development Committee (NDC) recently
completed a study that looks into the evolving role of
governments in nuclear energy matters. Many decisions on
government intervention in recent decades have been based
on the earlier experience of what works best. The report
suggests some considerations that all governments could
take into account when establishing their respective roles.

Government and Nuclear
Energy1 looks at the role
of governments in the evolving
context of the three main goals
of energy policy in NEA member
countries: adequate and
secure supply; competitive
markets and prices; and sustainable
development, including
goals for climate change
and air quality. The report
examines some of the forces
that influence the degree of
government intervention, while
trying to avoid issues of
ideology.

Governments have been
deeply involved in the development
of nuclear energy.
Some of them initiated and led
the development of nuclear
energy since its military beginnings
in World War II, because
of its strategic nature and the
scope of its risks and benefits.
Governments later supported
the development of civilian
nuclear energy, primarily for
the generation of electricity.
In the post-war period, governments
played an increasing
overall role in the economies
of the industrial countries.
Science and technology were
essential instruments of government
action and nuclear
energy was a highly visible
symbol of their successful
application.

In the 1980s and 1990s,
problems with exclusive government
ownership and control
of production equipment
appeared. Governments came
under pressure to cut expenditures
and diminish their
direct involvement in the economy.
Expanding international
trade forced all industries to be
more competitive. Markets
were championed as an alternative
to government direction
and regulation. Simultaneously,
environmental protection and
the concept of sustainable
development increased in
importance in policy making,
whilst the need to ensure
security of energy supplies
persisted or even increased.

In the current era of privatisation
and competitive
markets, governments still
have an essential role in
energy, electricity and
nuclear energy. While in
some countries they may
not exercise as much direct
control through ownership
and economic regulation as
in the past, they still have the
basic responsibility for creating
policy frameworks within
which market forces can
function and public policy
goals can be achieved. So,
with fewer direct instruments,
governments will need alternative
policy measures.

Why governments
intervene and when

The reasons for government
intervention in nuclear energy
have evolved as governments
confront their limits. Privatisation
and competition mean that
many decisions are no longer
directly made by governments.
However, there will always be
strategic reasons for government
intervention – national
security; emergencies, disasters
and health crises; national
projects of such importance or urgency that only government
can do the job. By and large,
the current sentiment in most
OECD countries is that the
government should intervene
only when it is in the best
position to carry out the task
and when the benefits of
intervention outweigh the
costs. In fact, the role of
governments in nuclear energy
varies considerably between
countries, according to their
specific history and situation.

The economic, social and
environmental reasons for
government intervention
generally fall into two categories:
market failure to
allocate resources efficiently,
and equity or distribution
concerns. Market failure may
relate to several issues, some
of which overlap: public
goods, infrastructure, externalities,
information
and competitive behaviour.
However, even if there is a
case for government intervention,
that intervention itself
should be well designed and
managed. Both markets and
government action can fail,
thereby affecting the customers
and societies that they serve.
The government should have
the competence and resources
to carry out its interventions
effectively.

Actual and recommended
involvement

The most important government
role is setting overall
policy for the economy,
energy and the environment,
with an adequate base in
legislation and institutional
competence. In particular,
governments should have
clear strategies for achieving
all three main goals of energy
policy over the coming
decades. They should show
how they will meet climate
change and air quality goals,
given the current and prospective
market dominance of fossil
fuels, as well as how to ensure
long-term security of supply
in open market conditions.
In this situation, governments
have hard choices to make
about whether, when and how
to intervene in order to achieve
the full range of policy goals.

Electricity sector ownership and concentration

Private, mixed or public

Market share of top 3 firms

Belgium

M

96

Canada

M

high*

Czech Republic

PU*

(high)

Finland

M

45

France

PU

92

Germany

PR

64

Hungary

(PU)

(high)

Japan

PR

(high)

Korea

(PU)

(high)

Mexico

(PU)

(high)

Netherlands

M

59

Slovak Republic

(PU)

(high)

Spain PR

PR

83

Sweden

M

90

Switzerland

PR

(high)

United Kingdom

PR

36

United States

PR

(variable)

*NEA Secretariat estimate.

In privatising and opening
markets to competition, governments
should make sure
that they respect some basic
principles. For markets, they
have an ongoing responsibility
to ensure fairness, access,
transparency and effective
regulation and to provide
the public goods that markets
may not otherwise deliver.
Governments should ensure
security of supply, through
incentives or other means
guaranteeing that generating
and transmission capacity as
well as reserve margins are adequate, and that the grid is
effectively regulated to avoid
severe fluctuations, or even
worse, blackouts.

Governments have a role
in looking at the long term
to compensate for the high
discount rate and short-term
perspective of competitive
markets, through appropriate
tax incentives or other
mechanisms. In particular,
they should carry out longerterm
and fundamental R&D
with a sustainable development
perspective in mind.
They should also assess R&D
on the basis of its contribution
to achieving the three energy
policy goals.

Governments should try
as much as possible to treat
nuclear energy on a similar
basis to other energy sources,
while keeping in mind its
unique properties. They should
sponsor studies that compare
the full life-cycle costs and
impacts, including risks, across
the spectrum of energy sources
and uses. They should also
internalise the external costs
of all energy activities on an
even basis. Regulation and
liability for radioactive waste
should be in line with those
for other activities.

Regulation of nuclear safety
and security remains a core
function of government. It
should guarantee the existence
of an independent, competent
regulator with adequate
resources and authority. The
emphasis now is on the safety
culture of organisations, beginning
at the most senior levels.
This brings in the need to
ensure good governance.
Nuclear regulation should be
in line with modern regulatory
practice across the government,
allowing nuclear energy to
compete fairly. Governments
looking for a future contribution
from nuclear energy
should ensure that regulation
is prepared to deal with issues
of decommissioning, refurbishment,
uprating, life extension
and new reactor designs.

Governments should look
beyond regulation to other
means of influencing the
behaviour of operators and
investors. Economic instruments
will be important in
this regard. Governments
will have a role in setting
up public processes for the
siting and approval of nuclear
installations, including waste
management facilities.

Governments have a role
in ensuring that flexible, stepwise
policies are in place for
the long-term management of
wastes and that funds and
institutions are available to
carry out the plans. They
should oversee the implementation
of policy to ensure
progress toward waste management
goals.

Governments should ensure
that the public is adequately
informed about energy policy
and that there is adequate
opportunity for public participation
in key energy decisions.
Processes for decisions
should incorporate the best
scientific information as well
as a broad spectrum of public
views. Governments should
take leadership on longer-term
energy policy issues and provide
clear justification for
preferred options. They should
also ensure that they and the
public can continue to access
basic information about energy
that may not flow freely in a
deregulated regime.

Governments clearly have
a lead role in diversion resistance,
non-proliferation and
national security. This includes
responsibility for the physical
security of critical infrastructure,
including nuclear facilities.
Governments should
guard against the use of nuclear
power materials as radiological
weapons. They should
also ensure that new fuel cycle
and reactor designs have builtin
resistance to proliferation
from the start.

The international
dimension

Intergovernmental cooperation
will continue to
be essential in the field of
nuclear energy. Concerns
about nuclear safety and
environmental impacts can
be effectively addressed
through international cooperation
and technical
assistance. The harmonisation
of safety and radiation protection
standards is helpful
in increasing public understanding,
especially in emergency
situations. Joint projects
on future reactor designs can
make efficient use of limited
national resources. In addition,
international consensus and
state-of-the-art reports can
contribute to public discussions
on nuclear energy.